2016 Budget Speech: Everything you need to know

 2016 Budget Speech: Everything you need to know

Last week South Africa’s Finance Minister Pravin Gordhan announced the 2016 budget. In the Budget Speech he had to balance South Africa’s books by providing a sound framework for the year ahead, in a manner that addresses the prevailing economic and social issues faced by the country.Let’s see how he fared…


2016 Budget Speech highlights:

The expenditure ceiling was cut by R25bn over the next three years (R10bn in 2017/2018 and R15bn in 2018/2019) to bring the budget deficit down to 2.4% of GDP by 2018/2019, and to stabilise debt as percentage of GDP around 45% of GDP. [,Original article]

  1. Incentive for employers to provide bursaries

A proposal was made for an increase in the fringe benefit tax exemption threshold for bursaries provided by the employer to employees and their relatives.

The qualifying bursary threshold is increased from R10 000 to R15 000 for basic education and from R30 000 to R40 000 for higher education.

  1. National Minimum Wage still in the works

Minister Pravin Gordhan reiterated South Africa is making progress towards implementing a minimum wage framework for South Africa. This is currently a topic attracting in-depth debate as on the one and, some argue that including a minimum wage will address the prevailing inequality in South Africa; whilst others argue that a minimum wage will instead lead to job losses.

The impact of a minimum wage will first need to be thoroughly investigated before implementing it; how much the minimum wage should be set at if implemented and other important factors such as how it will cater for geographic and industry-specific nuances.

  1. National Health Insurance (NHI) makes slow progress

Little is known about the NHI scheme apart from the fact that Proposals for the NHI scheme has been in discussion for 8 years and currently there is a pilot for the scheme. NHI is a national priority, given the importance of improving the quality of public healthcare and extending the reach of the system into the rural areas.

Minister Gordhan stated that the challenge at the moment is the high costs of implementing the NHI scheme, given South Africa’s economic challenges, and the complexity of marrying the public and private healthcare systems is another barrier to implementation.

  1. Personal Income Tax: watch the fiscal drag

Surprisingly Minister Pravin Gordhan left Personal Income Tax rates untouched. However, it’s worth mentioning that the personal income tax relief of R5.5bn granted this year is R7.6bn less than the R13.1bn that would have been required to account fully for fiscal drag.

Fiscal drag is the effect of inflation which puts taxpayers into a higher tax bracket even if your salary stays the same. Basically this means that your earning power is going backwards unless your salary package increase is well above inflation. [Original article]

Don’t celebrate just yet … even though there is no increase to personal income tax or VAT this year; R15bn in new taxes will be sought next year (2017) and a further R15bn the following year. [,Original Article]

  1. Fuel tax

Fuel levy has been increased by another 30c per litre. R4.28 per litre of petrol goes to government. This includes the Road Accident Fund (RAF).

  1. Sin Tax (alcohol and tobacco)

There has been an increase of about 7% in sin taxes. Maybe now would be a good time to quit smoking and drinking?

  1. Tyre tax

A new tyre levy will be introduced next year. The new environmental tax will stand at R2.30/kg on imported new, used or retreaded tyres

  1. Property tax
    If you plan on buying a property over the value of R10 million, your transfer duty costs will increase from 11% to 13% (In other words around R937 500 on a R10 million home.)


Spending programmes over the next three years

  1. 5bn on social grants.
  2. 1bn to universities, while the National Student Financial Aid Scheme (NSFAS) will receive R41.2bn.
  3. 4bn on basic education, including R45.9bn for subsidies to schools, R38.3bn for infrastructure and R14,9bn for learner and teacher support materials.
  4. 3bn for public housing.
  5. R102bn on water resources and bulk infrastructure.
  6. 3bn on transfers of the local government equitable share to support the expansion of access of poor households to free basic services.
  7. 3bn to strengthen and improve the national non-toll road network.
  8. 5bn to Metrorail and Shosholoza Meyl to subsidise passenger trips and long-distance passengers.
  9. 2bn for manufacturing development incentives.
  10. 5bn for national health insurance pilot districts.

[,Original article]

Download Finance Minister Pravin Gordhan’s full 2016 Budget Speech here.

I consulted the below articles to draft this blog. Click on the articles to read the original posts.

  1. Tech Central
  2. Maya on money

Catch me on Twitter to continue the discussion: ,,@AfricaPRFowzi

What’s your take on Minister Pravin Gordhan’s 2016 Budget allocation, viable or not?

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